Honda, Nissan purpose to merge by 2026 in historic pivot

By Kantaro Komiya

TOKYO (Reuters) – Honda (NYSE:HMC) and Nissan (OTC:NSANY) are in talks to merge by 2026, they stated on Monday, a historic pivot for Japan’s auto trade that underlines the risk Chinese language EV makers now pose to the world’s long-dominant legacy automobile makers.

The tie-up would create the world’s third-largest auto group by car gross sales after Toyota (NYSE:TM) and Volkswagen (ETR:VOWG_p).

It could additionally give the 2 corporations scale and an opportunity to share assets within the face of intense competitors from Tesla (NASDAQ:TSLA) and extra nimble Chinese language rivals, resembling BYD (SZ:002594).

The merger of Honda, Japan’s second-largest automaker, with Nissan, its No. 3, could be the largest reshaping within the international auto trade since Fiat (BIT:STLAM) Chrysler Cars and PSA merged in 2021 to create Stellantis (NYSE:STLA) in a $52-billion deal.

Smaller Mitsubishi Motors (OTC:MMTOF), by which Nissan is high shareholder, was additionally contemplating becoming a member of and would decide by the top of January, the businesses stated.

The chief executives of all three held a joint press convention in Tokyo.

“The rise of Chinese language automakers and new gamers has modified the automobile trade quite a bit,” stated Honda CEO Toshihiro Mibe, citing technological developments of electrification and autonomous driving.

“We now have to construct up capabilities to struggle with them by 2030, in any other case we’ll be overwhelmed.”

The 2 corporations would purpose for mixed gross sales of 30 trillion yen ($191 billion) and working revenue of greater than 3 trillion yen by the potential merger, they stated.

They aimed to wrap up talks round June 2025 earlier than organising a holding firm by August 2026, when shares of each corporations could be delisted.

Honda, which has a market capitalisation of greater than $40 billion, roughly 4 occasions that of Nissan, will appoint the vast majority of the corporate’s board, they stated.

Combining with Mitsubishi Motors would take the Japanese group’s international gross sales to greater than 8 million vehicles. The present No. 3 is South Korea’s Hyundai (OTC:HYMTF) and Kia.

Honda and Nissan have been exploring methods to bolster their partnership, together with a merger, Reuters reported final week. 

In March, each stated they have been contemplating co-operation on electrification and software program improvement. They widened the collaboration to Mitsubishi Motors in August.

Final month, Nissan introduced a plan to chop 9,000 jobs and 20% of its international manufacturing capability after gross sales plunged in the important thing China and U.S. markets.

Honda additionally reported worse-than-expected earnings because of a China gross sales hunch, though strong motorbike and hybrid automobile companies helped it safe a comparatively steady monetary base.

“This isn’t a rescue of Nissan,” nevertheless, Honda’s Mibe stated, including that Nissan’s enterprise turnaround was a “prerequisite” for the merger.

Like different international carmakers, Honda and Nissan have misplaced floor on this planet’s largest market China to BYD and different home makers of electrical and hybrid vehicles loaded with progressive software program.

In a separate on-line press convention on Monday, former Nissan chairman Carlos Ghosn, now wished in Japan as a fugitive for leaping bail and fleeing to Lebanon, stated he didn’t consider the Honda-Nissan alliance would achieve success, as the 2 have been automakers weren’t complementary.

French automaker Renault (EPA:RENA), Nissan’s largest shareholder, stated it could “talk about with Nissan and contemplate all attainable choices”. Sources have stated Renault is open in precept to a Honda-Nissan tie-up.

Taiwan’s Foxconn (SS:601138), looking for to broaden its nascent EV contract manufacturing enterprise, approached Nissan a few bid however the Japanese firm rejected it, sources have instructed Reuters.

Foxconn determined to pause the strategy after it despatched a delegation to fulfill with Renault in France, Bloomberg Information stated on Friday.

Nissan chief govt Makoto Uchida, at Monday’s press convention, denied a view that Foxconn’s transfer prompted its merger talks with Honda.

Uchida stated Nissan continued to work with Renault on a “challenge foundation” if there was synergy, whereas Mibe stated Honda wouldn’t change its relations with Common Motors (NYSE:GM).

Shares in Honda ended the day up 3.8%, Nissan rose 1.6% and Mitsubishi Motors gained 5.3% after information of the merger plan, whereas the benchmark Nikkei index closed up 1.2%.

($1=156.6600 yen)